Big farms set to pay the price as EU eyes subsidy cuts

HANNOVER, Germany — European Commissioner for Budget Günther Oettinger said Monday that Brussels plans to cut its payments to Europe’s biggest farms in the next budget cycle in order to reduce the bloc’s lavish agricultural subsidies by 6 percent.

Brussels is due to make a proposal for the EU’s 2021-2027 budget framework on May 2, and cutbacks are seen as inevitable because Britain will no longer be contributing funds. Agricultural spending is one of the most obvious targets for cost cutting because the Common Agricultural Policy represents almost 40 percent of the EU budget, or some €59 billion each year.

When asked by POLITICO about CAP cuts on the sidelines of a trade conference in Hannover, Oettinger said: “We cannot fully exempt the existing programs from cutbacks. And in comparison to 2020, as the last year of the existing financial framework, my proposal will focus on approximately 6 percent, a moderate 6 percent, reductions.”

One of the biggest criticisms of the CAP is that it has prioritized big landowners with direct payments based on acreage. Some 80 percent of CAP funds go to 20 percent of farms, owned by the likes of British royalty and major multinational companies.

Oettinger said the new budget model would aim to balance that slightly.

“What we have in mind is degressive funding: That means a very big business receives for its hectares a little bit less money than a small enterprise. And that’s exactly what we still have to discuss within the next next days. On Wednesday, we will have a discussion between [Agriculture Commissioner Phil] Hogan and me on this.”

Hogan has already told farmers to prepare for belt-tightening.

“We need to be realistic: In the absence of more money from member states, there will be a cut to the CAP budget. My job as I see it is to build the strongest possible coalition to resist the worst of these cuts, and achieve the best outcome in a difficult scenario,” he said last week.

Still, Oettinger said that he would also be calling on EU member countries to dig deeper into their coffers to help take the edge off the hole created by Brexit.

“We don’t want to fully compensate the Brexit gap through shortages. We want slightly higher payments by the member states. But a part of the Brexit gap — about 50 percent, as well as a part of the new tasks — should be financed through cutbacks.”

Much of the political discussion on slicing CAP funds has focused on whether the Commission should propose an internal structural shift between the program’s two “pillars.” The current CAP is divided between direct subsidies from Brussels to farmers — so-called Pillar 1 payments — and rural development funds, or Pillar 2.

Oettinger, however, cautioned that both would feel the squeeze.

“All the money goes to the operators, thus the farmers. One part goes into the second pillar, in the rural area,” he said. “We will make reductions in both pillars.”

This article is part of POLITICO’s new coverage of the EU budget, tracking the development of the seven-year Multiannual Financial Framework, and the first EU budget that will face a low or no contribution from the United Kingdom. This coverage includes the Budget Briefing newsletter every Monday afternoon. Email pro@politico.eu to request a complimentary trial.